Forest fires force up timber prices

Wildfires in Canada have forced the shutdown of several sawmills, resulting in a hike in timber prices and further pressure on an industry already hit by US duties.

Speaking exclusively to SM, Hakan Ekstrom, president of analysts Wood Resources International, said shutdowns due to forest fires were expected by the industry, but the closures had come at an inopportune time for the North American market.

He said buyers within the system had already been wary about building up inventories after the US annouced plans to introduce duties of up to 24% on lumber exports from Canada in May.

On top of the uncertainty created by the new duties, British Colombia’s wildfire crisis took hold just as Quebec’s forest sector began its annual two-week summer shutdown.

“So what we have right now is a pretty tenuous supply-demand balance,” he said.

“If we get actual fires at mills and they lose lumber inventory, that’s going to be a huge problem.”

The wildfires have swept across the western US and Canada, forcing thousands of evacuations across California, Colorado and British Colombia.

British Colombia said it had declared its own state of emergency—its first in 14 years—as over 200 fires were burning across the province and more than 10,000 people had been evacuated.

By Wednesday, the benchmark price of western spruce-pine-fir lumber had risen by 5.5% to US$400 per thousand board feet from US$369 last Friday, according to figures from Random Lengths.

Ketan Mamtora, an analyst with BMO Capital Markets, told the Globe and Mail that he expects prices will rise 6-8% over then next couple of weeks, partly due to limited supply.

“Fear over possible lumber shortages will also really push up the prices,” he said.

Ekstrom said emotions and drama often drove decisions, which would impact prices further.

“I expect the lumber market to get nervous and for wood consumers and brokers to buy more than they had planned and prices moving upward because of it,” he said.

“If the fire persists for a long time, that will have a much more meaningful impact on pricing.”

He added that in the case of mills staying shut for month or even sustaining damage, he estimates prices could rise 15-17%.

West Fraser Timber, Canada’s largest forestry firm, confirmed that they had temporarily shut mills at three of its locations, disrupting production of logs and plywood.

Norbord, the largest North American producer of oriented stand board used in residential construction, said it had temporarily suspended production at its mill and was assessing the fire’s impact.